Turkey’s economic troubles are quickly climbing to the top of the country’s agenda amid increasing signs of a rift in the upper echelons of government in Ankara. Even the flashy 7.4% growth rate for 2017, announced March 29, failed to alleviate the economic gloom, punctuated in early March by the decision by Moody’s, the international credit rating agency, to cut Turkey’s sovereign rating further into junk territory. Coupled with other adverse indicators and global headwinds affecting emerging countries, the state of Turkey's economy has triggered in-house rows among its top managers. With next year’s election cycle in mind, President Recep Tayyip Erdogan is insisting on interest rate cuts, thereby exacerbating tensions with the Cabinet and the central bank, which sit at the steering wheel of the economy.

The friction over interest rates has been ongoing for years, but it has lately increased amid the slump of the Turkish lira, which lost 5% of its value in March alone. What has emerged as a rather novel development is that Erdogan’s outbursts behind closed doors are now leaking from the Justice and Development Party (AKP) and making headlines in the press.

Drawing on the 7.4% growth rate, the government was keen to polish its image, allowing little discussion of the serious drawbacks lurking behind the showy figure. Its efforts, however, suffered a series of blows with the release of additional economic data.

Inflation figures for March, made public April 3, offer little hope of improvement. Year-on-year consumer inflation seems to be ossifying at about 10%, and producer inflation is climbing toward 15%. In the fight against inflation, efforts to reign in cost increases, fueled by rising food and foreign exchange prices, are failing to bear fruit. The use of imports to cover supply shortages in the food sector is also proving inefficient because of the rising foreign exchange prices. In fact, the increase in the dollar price, about 5% in March alone, means higher production costs in every industry as imported materials become more expensive, thus fueling consumer prices.